CEZ Caps Longest Rally This Year on Espirito Buy: Prague Mover

March 6 (Bloomberg) -- CEZ AS increased for a fourth day,
its longest stretch of gains since December, as Banco Espirito
Santo SA recommended buying the biggest Czech utility’s shares.

The stock jumped as much as 2 percent and closed up 0.7
percent at 612 koruna, with the number of shares changing hands
at 164 percent of the three-month daily average. CEZ fell 13
percent this year through Feb. 28 to its lowest level since
October 2008 as power prices tumbled.

Espirito Santo upgraded Prague-based CEZ to buy from sell
today in a report from Warsaw-based analyst Maciej Hebda, naming
CEZ its top pick among utilities in emerging Europe. While power
for next-year delivery in Germany, where CEZ exports part of its
output, slid to a record-low 40.40 euros on Jan. 31 and traded
at 41.30 euros today, the company said on Feb. 28 it had presold
more than a half of its 2014 output at 49.50 euros to 50 euros.

“The market overreacted to the recent German power-price
decline” and “overlooked the positive impact of hedging on
achieved prices,” Hebda said in the research note. The stock’s
valuation is “attractive given higher expected dividend yield
versus Polish utilities,” he said.

Espirito increased its “fair value” price estimate for
CEZ shares to 745 koruna from 683 koruna in the report.